TMI Blog1983 (3) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... had no goodwill or interest in the firm and her share of goodwill was not includible in the principal estate left by her. The Assistant Controller held that the firm had goodwill and since it was not adjusted after the retirement of the deceased from the aforesaid firm to her account, the share of the deceased in the goodwill of the firm at the time of retirement was a gift made within two years. He, accordingly, included the sum of Rs. 1,03,042, being 15 per cent of the deceased's share in the goodwill of the firm determined at Rs. 6,86,952. 6. The accountable person appealed to the Commissioner (Appeals) and contended that the Assistant Controller was wrong in holding that the firm UBM Sales Services had goodwill. It was urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the extinguishment of debt or right. If, therefore, the firm had goodwill as an asset to which the deceased was entitled and if she did not take her share in that asset, it is an extinguishment at the expense of the deceased of her right in favour of the remaining partners and this is a disposition in view of the provision of Explanation 2 to section 2(15). In this case the other partners were only the sons and grandsons of the deceased and, therefore, the disposition as explained above is in favour of relatives without any consideration. This would be a gift under section 9 read with section 27(1). A similar question had come up for consideration before the Supreme Court in the case of CED v. Kantilal Trikamlal [1976] 105 ITR 92. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative, is not relevant to this issue as that was a case regarding the meaning of the term ' transfer ' in relation to throwing of a separate property into a common hotchpot of a HUF. Since in the estate duty the term ' disposition ' is much wider than the form ' transfer ' and the Supreme Court has made such relinquishment as disposition in the case cited earlier, the argument of the appellant's representative that this cannot be treated as gift is not acceptable." The Commissioner (Appeals) was, however, of the opinion that the quantum of the deceased's share of goodwill, as determined by the Assistant Controller, was excessive and he reduced the same to Rs. 71,961. 7. Against the aforesaid order of the Commissioner (Appeals), the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a HUF. Reliance was also made to the provisions of section 6 of the Act and it was pointed out that since the deceased had no right to transfer her share of goodwill on her date of death, it was not includible in her principal estate. Reliance was placed on the decision of the Allahabad High Court in the case of CED v. Smt. Laxmi Bai [1980] 126 ITR 73 wherein a decision of the Supreme Court in the case of CIT/CED v. N.R. Ramarathnam [1973] 91 ITR 1 had been considered. In that case the deceased, his three sons and a daughter were partners in a firm which carried on money-lending business. On 31-3-1953 and 1-4-1956, the deceased transferred to his sons and daughter amounts totalling Rs. 1,29,924 by adjustment entries in the books of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol of the market regarding sale of that products. Therefore, the said firm had goodwill. Reliance was also placed on the decision of the Supreme Court in the case of Kantilal Trikamlal and urged that the provisions of sections 9(1), 27(1) and Explanation 2 to section 2(15) were applicable to the facts of the instant case. 9. The goodwill of the firm UBM Sales Services was not confined to manufacturing business. The Allahabad High Court in the case of Smt. Kamlawati Raizada v. CED [1976] 105 ITR 703 has held that business ordinarily available and standard articles can also have goodwill. We are, therefore, of the opinion that the firm had goodwill. However, section 5 of the Act is the charging section. The only question relevant under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 2 to section 2(15). But in the instant case, the deceased retired from the firm before her death. As soon as a partner retires from a firm he ceases to be a member of the said firm and, therefore, after the date of retirement he cannot have any interest except his dues as per settlement of accounts of the firm. It was not the case of the revenue that the deceased had relinquished his share of goodwill of the firm in favour of other partners. In view of what we have stated above, we would hold that the lower authorities were not justified in including the share of goodwill of the firm UBM Sales Services in the principal estate of the deceased. Accordingly, we direct that the amount of Rs. 71,961 be deleted. 12. In the result, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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